WTO Accession, "Greater China" Free Trade Area and Economic Relations across the Taiwan Strait

This paper evaluates the impact of China's WTO accession on trade and economic relation across the Taiwan Strait and its implications for rest of the world by a recursive dynamic, 17-region, 25- sector computable general equilibrium (CGE) model according to actual market access commitments that China and Taiwan have made in their final official WTO offers. The simulation results shown that China will gains the most from its WTO entry. It will emerge as one of the world largest manufacturing center during its integration into the world economy. Taiwan will become an upstream supplier for China's massive manufacturing productions. Taiwan will gain more economically by further integrate its economy with China via greater China FTA or other means after its WTO entry. The economic dependence of Taiwan on China will further increase and enable China to replace the US as the number one of its export market. A greater China FTA will further reduce the cost of vertical integration among manufacturing industries across the Taiwan Strait and enhance the efficiency of production factor allocation within the three Chinese economies, thus enable them become a stronger competitor of manufactured goods, especially for labor-intensive products, electronics and low-end capitalintensive products in the world market. Rest of the world, especially developed countries and Asian newly industrialized economies, as well as resource abundant developing countries would also benefit from further liberalization of Chinese economies. Only developing countries with an endowment and export structure similar to China's, such as South Asia and ASEAN countries may experience keener competition in labor-intensive exports and lower prices for their products.